Chapter 24 Aggregate Demand Supply Model

*Ch24 Aggregate Demand Supply Model*

*Multiple Choice Questions*

*1.* _______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.

A. Keynesian economists; long run
B. Keynesian economists; short run
C. Neoclassical economists; long run
D. Neoclassical economists; short run

Answer: C Reference:

Explanation:

Type: Multiple Choice

*2.* Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________, holding the price of inputs fixed.

A. total quantity; price level for output
B. type of goods; input price of raw materials
C. price of goods; number of employees
D. total inputs; types of goods

Answer: A Reference:

Explanation:

Type: Multiple Choice

*3.* The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:

A. real GDP.
B. potential GDP.
C. aggregate supply.
D. aggregate demand.

Answer: B Reference:

Explanation:

Type: Multiple Choice

*4.* The term ”full employment GDP” is synonymous with which of the following?

A. aggregate GDP
B. Keynesian zone
C. macroeconomic equilibrium
D. potential GDP

Answer: D Reference:

Explanation:

Type: Multiple Choice

*5.* In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output.

A. macroeconomic equilibrium
B. aggregate supply (AS)
C. aggregate demand (AD)
D. potential GDP

Answer: C Reference:

Explanation:

Type: Multiple Choice

*6.* _________________ results when an economy experiences high unemployment and high inflation at the same time.

A. Stagflation
B. Deflation
C. Reflation
D. Recession

Answer: A Reference:

Explanation:

Type: Multiple Choice

*7.* Say’s Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy.

A. potential GDP; value of supply
B. total quantity of goods; price level for output
C. natural rate of unemployment; full employment GDP
D. value of supply; value of demand

Answer: D Reference:

Explanation:

Type: Multiple Choice

*8.* When the economy of a country is operating close to its full capacity:

A. the unemployment rate is greater than the natural rate of unemployment.
B. cyclical unemployment is close to zero.
C. unemployment is close to zero.
D. the unemployment rate is less than the natural rate of unemployment.

Answer: B Reference:

Explanation:

Type: Multiple Choice

*9.* Potential GDP in the U.S. will be unaffected by ____________________.

A. technology
B. the amount of capital available
C. the unemployment rate
D. government institutions

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